The Emirates Economist

Economic analysis of events in the United Arab Emirates and the Gulf

Monday, February 28, 2011

Omani protests intensify

One of the stereotypes of Omanis and Emiratis is that Omanis are gentle and easygoing, and Emiratis are pushy and demanding -- and that these traits are deeply rooted culturally. I'm thinking of those stereotypes when I read this report from Reuters:

A doctor said six people had been killed in clashes between stone-throwing protesters and police on Sunday in the northern industrial town of Sohar. Oman's health minister said only one person had been killed and 20 wounded.

Hundreds of protesters blocked access to an industrial area that includes the port, a refinery and aluminum factory. A port spokeswoman said exports of refined oil products that typically amount to 160,000 barrels per day from the port were unaffected.

"We want to see the benefit of our oil wealth distributed evenly to the population," one protester yelled over a loudhailer near the port. "We want to see a scale-down of expatriates in Oman so more jobs can be created for Omanis."

Peaceful protests also spread to other cities, with hundreds of people demonstrating outside a government ministerial complex in Muscat and at another site in the capital.

The unrest in Sohar, Oman's main industrial center, was a rare outbreak of discontent in the normally sleepy sultanate ruled by Sultan Qaboos bin Said for four decades, and follows a wave of pro-democracy protests across the Arab world.

UAE rulers tuned in; increase handouts

President His Highness Sheikh Khalifa bin Zayed Al Nahyan has instructed the establishment of the Khalifa Fund for Enabling Emiratisation in support of the empowerment policy he has launched and in completion of the President's initiatives seeking to advance socio-economic development plans, provision of decent living means and stability to UAE citizens.

The new institution aims to provide financial resources necessary to support programmes and policies for encouraging UAE citizens to enter the private sector labour market, help them to seize job opportunities the private sector offers, and secure required funds for delivering a package of rewards towards achieving that end.

In its meeting today under the chairmanship of Vice President and Prime Minister of the UAE and Ruler of Dubai His Highness Sheikh Mohammed bin Rashid Al Maktoum, the federal cabinet reviewed the work mechanisms of the new entity, scope of its mandate and executive measures needed to start its operation as soon as possible under the supervision of the National Human Resources Development and Employment Authority (Tanmia).

The package of incentives the Fund will offer includes payment of financial privileges when a UAE citizen joins work at the private sector so as to reduce the pay gap between the public and private sectors, allocation of funds to employers to help them cover a certain percentage of the pay the national private sector employees will draw in the first year, funding part of training and rehabilitation costs of the new national employee when he joins the private sector for the first year and contribution to long and short term training programmes for national job seekers.

The Fund will also use its financial resources to advance policies and programmes aimed at creating new job offers at the local and federal levels, supporting and financing small and medium scale enterprises, and financing university specialisations that cater for requirements of the local labour market.

The Fund will act as a key contributing mechanism to leverage participation of citizens and develop the social welfare concept into a new one that enables able social assistance recipients to become a productive force contributing to the growth of the national economy. It will also serve as a mechanism for facilitating success of Emiratisation policy and programmes and increasing the share of small size businesses owned by UAE citizens in a way that generates more job opportunities.

Sunday, February 27, 2011

What do Omani protests portend for UAE?

Authorities had to use teargas to disperse protesters at the Globe Roundabout in the port town of Sohar this morning, according to an eye witness.

"A helicopter is dropping shells and teargas is used to control the crowds that has stayed put at the Globe Roundabout since yesterday," an eye witness, who preferred not to be named, told Gulf News over the phone from Sohar.

The action by security could not be confirmed by any authority.

According to a Dubai resident he had to return to UAE because roads at the Sohar were blocked and they were turned back.

The social media is abuzz with tweets and blogs about the protests in Sohar where the protesters are demanding reforms and end to corruption.

What does this portend for the UAE?

The UAE is much richer, and government handouts allow a comfortable life. I don't see economics being a driver of dissent in the UAE. Quite the opposite -- why risk instability? In addition, on this score the rulers stay ahead and increase handouts to defuse dissent on economic grounds. That does prompt the question: Isn't this proof they have far more to give, and that citizens ought to asking why there's not a greater sharing of national income; why does the bulk go to so few?

There are a few voices of dissent calling for greater transparency and representation, and/or criticizing foreign policy. Those are repressed, which if anything does suggest the ruling powers fear dissent could spread -- the tactic, however, could backfire especially in the current environment.

By contrast, Oman has a recent history of allowing citizens to let off steam. It doesn't have the oil wealth the UAE does.

Saturday, February 26, 2011

Honduras takes a tip from Dubai

Thanks to the jet engine, Dubai has been able to transform itself from a backwater into a perfectly positioned hub for half of the planet's population. It now has more in common with Hong Kong, Singapore and Bangalore than with Saudi Arabia next door. It is a textbook example of an aerotropolis, which can be narrowly defined as a city planned around its airport or, more broadly, as a city less connected to its land-bound neighbors than to its peers thousands of miles away. The ideal aerotropolis is an amalgam of made-to-order office parks, convention hotels, cargo complexes and even factories, which in some cases line the runways. It is a pure node in a global network whose fast-moving packets are people and goods instead of data. And it is the future of the global city....This hasn't been lost on Paul Romer, the Stanford University economist overseeing the development of an instant city in Honduras. He proposes building "charter cities" in impoverished states with new laws, new infrastructure and foreign investors—free trade zones elevated to the realm of social experiment. Mr. Romer sold Honduran President Porfirio Lobo on the idea in November and has stayed on as an adviser. Last month, the Honduran Congress voted to amend the country's constitution to allow the pilot project to proceed....In making his case to the Honduran public, Mr. Romer pitched the city as an aerotropolis. "Honduras could be the hub that brings Central America and Latin America into the world-wide network of air traffic," he wrote. "Central America will eventually have a major hub. It's a question of where, not if." Without air connections to the outside world, his charter city will stagnate. "If you're going to take the next step from assembling garments to assembling iPads," he told me, "you've got to have a major airport, or you'll never beat Shenzhen."

To implement this vision, the Honduran National Congress has already passed an amendment to the constitution that gives the government the power to create special development regions (which based on the name in Spanish, are abbreviated as REDs). The amendment passed with 126 votes in favor from a total of 128 members of Congress (one abstention and one vote against.) The nearly unanimous vote sends a strong signal about the breadth of support for this new initiative. The National Party, the party of the government and the President (who is elected separately), has about 70 seats in Congress. Members of all parties supported the amendment, including members from rival factions within the opposition Liberal Party.

To become a part of the constitution, the amendment must be passed again in the new Congressional session, which has already begun.

Here are the key points in the amendment:

The government of Honduras has the option to create one or more REDs, but in no way locks them into to doing so.

To create an RED and establish its basic system of governance, the amendment requires that the Congress pass a piece of enabling legislation that they call a Constitutional Statute. This requires a two-thirds majority to pass. A subsequent Congress can change this enabling legislation only with the same two-thirds majority and approval by referendum from the citizens living in the RED.

The REDs would be areas with their own legal personality and jurisdiction, their own administrative systems and laws. An RED can also negotiate international treaties with partner countries or organizations. Congress would need to ratify these international treaties with a simple majority.

Judges for its judicial system will be nominated by the governing authority in theRED but subject to approval by a 2/3rds majority in the Congress. The judicial arrangement would allow the use of an external body that acts as the court of final appeal for judicial decisions from the zone.

Laws developed by the governing authority of the RED require a ratifying vote by the Congress. This vote would be a simple vote to approve or reject. Approval requires only a simple majority. (This is similar to the BRAC rules that govern military base closures in the United States.)

Most important among the immediate next steps is a public discussion about the merits of establishing the first RED, its location, and the specifics about how foreign governments can assist in its governance. The government is already working to raise awareness of the effort both in Honduras and internationally. The international efforts will focus on potential partner countries, major investors, firms and individuals with special expertise, and influential supporters in the broad community of people concerned with economic development.

At the same site is more about Romer and the charter cities concept. The Emirates Economist has previous posts on charter cities. Click on the label below.

Prince Alwaleed bin Talal calls for political reform in KSA

Alwaleed bin Talal bin Abdulaziz Al-Saud is a grandson of the founding king of modern Saudi Arabia. His op-ed, A Saudi Prince’s Plea for Reform, appears in the New York Times:

We can succeed only if we open our systems to greater political participation, accountability, increased transparency and the empowerment of women as well as youth. The pressing issues of poverty, illiteracy, education and unemployment have to be fully addressed. Initiatives just announced in my country, Saudi Arabia, by King Abdullah are a step in the right direction, but they are only the beginning of a longer journey to broader participation, especially by the younger generation.

The lesson to be learned from the Tunisian, Egyptian and other upheavals — which, it is important to note, were not animated by anti-American fervor or by extremist Islamic zeal — is that Arab governments can no longer afford to take their populations for granted, or to assume that they will remain static and subdued. Nor can the soothing instruments of yesteryear, which were meant to appease, serve any longer as substitutes for meaningful reform. The winds of change are blowing across our region with force, and it would be folly to suppose that they will soon dissipate.

Good paragraphs

In his inaugural address, U.S. President John F. Kennedy said of the new countries of the developing world, "We shall not always expect to find them supporting our view. But we shall always hope to find them strongly supporting their own freedom." This was not just inaugural hot air. Whatever its foreign policy, a government whose legitimacy depends on delivering the goods to its citizens rather than on demonizing outsiders -- including the West -- will ultimately be a better partner for the United States.

Qaddafi has preferred mercenaries and street thugs rather than regular soldiers for his security. He has avoided keeping a competent army, an institution that would have been a threat to his rule. With few external threats and all of the biggest risks to his power coming from inside the country, Qaddafi rationally preferred outsiders for security -- as we have witnessed, they have less compunction pulling the triggers when necessary. The recent events in Egypt supported Qaddafi's security strategy -- Egypt's well-established and nationally respected army removed Hosni Mubarak from office relatively quickly.

Mother Jones looks at Saif Gaddafi's LSE PhD thesis

Saif Qaddafi’s performance [his "speech" on Tuesday] was right out of the autocrats’ playbook. It was also totally out of sync with a PhD dissertation he finished in 2007 (with the help of a Harvard-connected consulting firm retained by Tripoli) for the London School of Economics, when he was a doctoral candidate in its philosophy department. The 429-page thesis was entitled, "The Role of Civil Society in the Democratisation of Global Governance Institutions: From Soft Power to Collective Decision Making?" Drawing heavily on the work of American philosopher John Rawls, who formulated a theory of justice and fairness, the work is chockfull of pro-democracy sentiment. Saif Qaddafi’s main point: international organizations and NGOs are central to spreading democracy and their member states must reflect the same dedication to core democratic principles.

...

On his acknowledgements page, Saif noted that his thesis was made possible, in part, due to the assistance of a “number of experts...especially Professor Joseph Nye” of Harvard. One of the godfathers of the international relations theories of neoliberalism and soft power, Nye read portions of the paper and provided “advice and direction.” Probably not coincidentally, Nye twice visited Libya in 2007 and 2008 as a paid consultant for the Monitor Group, a Boston-based consulting firm then working for the Qaddafi government. He tells Mother Jones that he read one chapter of the dissertation and "found it intelligent." After the 2007 trip, Nye wrote an essay for The New Republic, extolling Qaddafi's efforts to clean up his image.

...

The Monitor Group, which is connected to leading professors at the Harvard School of Business, sent several prominent foreign policy thinkers (in addition to Nye) to Libya to meet with the Libyan leader, including neocon Richard Perle, another paid adviser for Monitor. This was part of its paid-for-by-Tripoli effort to rehabilitate Qaddafi. And as Saif Qaddafi wrote in his acknowledgements, the group also helped him conduct research for his dissertation—raising the possibility that this thesis was another component of the Monitor Group’s makeover campaign for the Qaddafi regime. The consulting firm pocketed $3 million a year for its pro-Qaddafi endeavors.

Quite apart from what Saif is up to these days, Harvard and the London School of Economics has some (more) explaining to do.

Thursday, February 24, 2011

Is your revolution cable-ready?

Wikileaks cables are providing a wealth of information into the Gaddafi family reports AP:

Growing anger over crass behavior by Gadhafi’s offspring, such as son Hannibal’s 2008 arrest for beating servants in a hotel in Switzerland, may have helped spark the current uprising. “The family has been in a tailspin recently,” a cable assessed a year ago....Saadi was described as having a troubled past, including run-ins with police in Europe, drug and alcohol abuse, and excessive partying, a 2009 cable said. It was an important objective for the regime to create “the appearance of useful employment” for Gadhafi’s children, the report said.

Flaunting of wealth was starting the hurt the family’s image, the diplomats said. They noted that Muatassim “kicked off 2010 the same way he spent 2009 — with a New Year’s Eve trip to St. Bart’s — reportedly featuring copious amounts of alcohol and a million-dollar personal concert courtesy of Beyonce, Usher, and other musicians.”

“The family has provided local observers with enough dirt for a Libyan soap opera,” the 2010 cable concluded.

Two bookends: Humiliation and legitimacy

“Humiliation” is the consequence of combined material and intangible pressures on ordinary people that include petty corruption, police brutality, abuse of power, favoritism, unemployment, poor wages, unequal opportunities, inefficient or non-existent public services, lack of freedoms of expression and association, state control of media, culture and education, and many others. Ordinary men and women grow up in non-democratic societies feeling increasingly frustrated that they cannot achieve their own human potential, while simultaneously they witness a small group of men and women in the ruling elite grow fabulously rich simply because of their connections, rather than their abilities....“Legitimacy” in the public realm is the antidote to the humiliation that the state and society, and foreign powers, have inflicted on ordinary Arab men and women who have been largely denied the substance of their humanity and their citizenship. The changes that young and adult Arabs now demand in their societies are anchored in a powerful need for legitimate governance structures that can replace the fraudulent and corrupted ones that have reigned for many decades. Legitimacy is a simple but overpowering concept that requires public governance institutions and decisions to reflect the will of the majority, while also protecting the rights of minorities. The two most critical elements of legitimate governance systems in the Arab-Islamic lands are accountability and a sense of justice or equity. These can find expression in many textures and shades, including most importantly, in Arab lands, the historical concepts of Arabism, tribalism and Islamism, among others that are more modern. Constitutions, parliaments, electoral laws and many other such concepts can be devised in many forms, but they must be legitimate in the eyes of their people above all else, if our societies are finally to leave the dark tunnel of the modern Arab security state and its stultifying, corrupting, mediocratizing legacy.

Sentence of the day

Separately, the UK Ambassador categorically denied Saif al-Islam's claims that the UK agreed to Megrahi's return in exchange for business deals, and said the UK was reconsidering its representation at the 40th anniversary of Qadhafi's coup September 1.

Wednesday, February 23, 2011

KSA regime buying time

In the US we call it targeted spending:

Saudi King Abdullah returned home on Wednesday after a three-month medical absence and unveiled benefits for Saudis worth some $37 billion in an apparent bid to insulate the world's top oil exporter from an Arab protest wave....Mahmoud Sabbagh, 28, said he and 45 other young Saudi activists had sent the king a petition advocating more profound change, not just economic handouts. He listed the group's demands as "national reform, constitutional reform, national dialogue, elections and female participation."

Saudi Arabia holds more than $400 billion in net foreign assets, but faces social pressures such as housing shortages and high youth unemployment in a fast-growing population.

"Housing and job creation for Saudis are two structural challenges this country is facing," said John Sfakianakis, chief economist at Banque Saudi Fransi, who put the total value of the king's measures at 140 billion riyals ($37 billion).He said some benefits were one-off and others were already budgeted.

As I've asked when Mubarak tried this strategy, why were you holding back? Where's the money coming from -- or better, who's pocket is it not going to?

KSA produces less than 10 million barrels a day. Today the price of a barrel of oil reached $100. In short, on a good day they take in $1 billion (costs are small). $37 billion would be nothing to sneeze if it were new recurring and recurring spending.

Given that it's not, how much time is the handout buying? Enough for the revolution fervor to pass?

Should Grecian Formula sue aging autocrats?

I know there are other examples of autocrats who don't want their childrencitizens to be reminded of how long they've been around. You know who you are. Be yourself -- give up to the addiction to the black shoe polish.

The autocrats that stick together, stick together

Fidel Castro said Tuesday that unrest in Libya may be a pretext for a NATO invasion. Nicaragua’s Daniel Ortega has jumped to the support of the embattled leader of the North African nation, saying he telephoned to express solidarity.

The protests sweeping across Libya have created challenges for the Latin American allies of Moammar Gadhafi.

Leftist governments in the Americas have long embraced him as a fellow fighter against U.S. influence in the world. Gadhafi has responded over the years by awarding the Moammar Gadhafi International Human Rights Prize to Castro and Ortega, as well as to Presidents Hugo Chavez of Venezuela, Evo Morales of Bolivia.

Not that Castro doesn't have a point that the U.S. does not have clean hands in Latin America or the Middle East. The U.S. has supported many dictators when their foreign policy is more likely to serve U.S. interests. At the same time, the U.S. has also at time made dictators who masquerade as the people's choice uncomfortable.

Berlesconi and Gaddafi: made for each other

Last August, Berlusconi gave Gadhafi a hero's welcome in Rome, and the Libyan came with a surprise: Bedouin riders mounted on 30 thoroughbred horses flown in from Libya performed in what one daily quipped was a circus spectacle with Gadhafi acting as ringmaster.

The Libyan leader also received 500 young women — hired by a modeling agency and paid $100 each to listen to a lecture on Islam, which he said should be the religion of all of Europe.

Granted the solemn honor of lecturing at Rome University, Gadhafi caused even more controversy.

He said the word democracy derives from the Arabic for "chair," and he reached the surreal conclusion that democracy will be achieved only when all the people are seated on chairs.

Surreal? I don't know the Arabic derivation for democracy, but if everyone has a seat at the conversation that sounds like democracy. Oh dear, Gadhafi makes more sense that Berlusconi?

Even some in government were disturbed, accusing Gadhafi of having transformed Rome into his own private Disneyland for his senile vanity. But Berlusconi had only words of praise for his guest.

"It is an advantage for everyone that relations between Italy and Libya have changed and are definitely positive," Berlusconi said. "Those who do not understand this and criticize Libya belong to the past and are prisoners of outdated ideas."...The two leaders are so close that when asked on Sunday if he had talked with his friend, Berlusconi replied, "The situation is unclear, so I won't disturb anyone."

The so-called friendship treaty between Italy and Libya requires Italy not criticize Libya.

Professor David Held, an academic adviser to Saif Gaddafi during his four years at the LSE, said: "Watching Saif give that speech – looking so exhausted, nervous and, frankly, terrible – was the stuff of Shakespeare and of Freud: a young man torn by a struggle between loyalty to his father and his family, and the beliefs he had come to hold for reform, democracy and the rule of law. The man giving that speech wasn't the Saif I had got to know well over those years."...While studying for his PhD, Saif enjoyed a life of considerable luxury in one of London's wealthiest and most prestigious suburbs. In August 2009 Gaddafi bought his son a £10m house in north London. Inside the neo-Georgian eight-bedroom mansion, Saif could relax in his own swimming pool sauna room, whirlpool bath and suede-lined cinema room.

Now the entourage of blacked-out cars parked on Saif's driveway has disappeared and there is less need for the forest of CCTV cameras or the private security team who had been on hand to protect him at all times.

During his time in London Gaddafi mixed socially with Lord Mandelson and the financier Nathaniel Rothschild, and was said to be on friendly terms with the Duke of York. He played a leading role in talks that led to the 2009 release of Abdelbaset al-Megrahi, the man convicted of the 1988 Lockerbie bombing in which 270 people died. While flying Megrahi home to Libya on a private jet, Gaddafi Jr gave a television interview in which he said the release had been linked to lucrative business deals.

"The Saif I came to know was one committed to strong liberal values and democratic standards," Held said. "He looked very much to Britain and to the US for inspiration and he certainly was passionately committed to constitutional reform of his country, the rule of law, to democratic elections and to human rights.

"After his speech on Monday, there is no way now in which he can be a credible agent of reform. He was developing a set of democratic and liberal beliefs and he was putting those into practice. He saw them as seeds – as a stepping stone for the reform of his country.

"The only way I can make sense of his speech is that the speed of change in the Middle East has caught him unawares and overwhelmed him. The position he has taken compromised him in every way, and made him the enemy of ideals he once proclaimed."

Held has also issued his own statement, including this on the LSE Global Governance Research Centre:

I have known Saif al-Islam Gaddafi for several years since he did a PhD at the LSE. During this time I came to know a young man who was caught between loyalties to his family and a desire to reform his country. In many discussions and meetings I encouraged the development of his reform agenda and subsequently sought to support it through research on the North Africa Programme funded by the Gaddafi International Charity and Development Foundation.

My support for Saif al-Islam Gaddafi was always conditional on him resolving the dilemma that he faced in a progressive and democratic direction.

The School has had a number of links with Libya in recent years. In view of the highly distressing news from Libya over the weekend of 19-20 February, the School has reconsidered those links as a matter of urgency....LSE Global Governance - a research centre at the School - accepted, with the approval of the School's Council, a grant from the Gaddafi International Charity and Development Foundation, chaired by Saif-al-Islam, one of Colonel Gaddafi's sons and an LSE graduate. ... The Council of the School will keep the position under review.

I wonder if LSE considered the odds that the thesis wasn't written by Saif. The Telegraph's 2009 story about the thesis adds to my curiosity.

Sentence of the day

The White House is "analyzing" the speech of Saif al-Islam Gadhafi to see "what possibilities it contains for meaningful reform," a senior U.S. administration official said Sunday night after the Libyan leader's son took to the airwaves to propose speedy implementation of significant democratic reforms following days of anti-government demonstrations.

Sunday, February 20, 2011

Paragraphs of interest

“Saudi Arabia did not build a causeway to Bahrain just so that Saudis could party on weekends,” said Toby Jones, an expert on Saudi Arabia at Rutgers University. “It was designed for moments like this, for keeping Bahrain under control.”

Saudi officials have tried to appear unruffled. On Wednesday evening, Prince Nayef bin Abdel Aziz, the interior minister, invited a group of prominent intellectuals and journalists in Riyadh to discuss the recent turmoil. He struck a confident tone, saying that Saudi Arabia is “immune” to the protests because it is guided by religious law that its citizens will not question.

The King is popular. Prince Nayef is next in line. The religious police are not popular.

Saturday, February 19, 2011

Interactive map of protest tweets

Let them chew khat?

For the past three weeks, protests have rocked this impoverished Middle Eastern capital. Some were massive; others were tiny. But one thing has remained constant: They all ended before 2 p.m. That's when most Yemenis enter khat-chewing sessions in their homes or cars, or practically anywhere.

"In Yemen, chewing khat is like drinking water," said Samir al-Sami, an aid worker observing the demonstration. "We can't live without it."

Friday, February 18, 2011

Prince Talal says reform in KSA is urgent

Prince Talal bin Abdul-Aziz Al Saud told BBC Arabic that "anything could happen" if King Abdullah Bin Abdul Aziz did not proceed with a program of political transformation. "King Abdullah ... is the only person who can carry out these reforms," the prince told the broadcaster. "On his departure, may that be in many years to come, latent trouble will surface and I have warned of this on many occasions. We need to resolve the problems in his lifetime," the prince added.

Talal added that if Saudi authorities "don't give more concern to the demands of the people, anything could happen in this country".

Talal has long called for reform in Saudi Arabia and formed the liberal political group "Free Princes Movement" in 1958 in reaction to the hostility between former kings Saud and Faisal.

Are Arabs ready for democracy?

You say you want a revolution, here's what ya need to know

... for decades, his practical writings on nonviolent revolution — most notably “From Dictatorship to Democracy,” a 93-page guide to toppling autocrats, available for download in 24 languages — have inspired dissidents around the world, including in Burma, Bosnia, Estonia and Zimbabwe, and now Tunisia and Egypt.

When Egypt’s April 6 Youth Movement was struggling to recover from a failed effort in 2005, its leaders tossed around “crazy ideas” about bringing down the government, said Ahmed Maher, a leading strategist. They stumbled on Mr. Sharp while examining the Serbian movement Otpor, which he had influenced.

Next leader to step down

Next Leader To Step Down

Singles Only, Applies to the next country from the below list to have a prime minister/president/monarch/state leader step down due to public protests, Must be reported by Sky News, PP decision is final in settlement.